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CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
135
The following table presents the pre-tax gain (loss) recognized in, and reclassified from, accumulated other
comprehensive income (AOCI) related to instruments designated as cash flow derivatives:
Years Ended December 31,
Cash Flow Derivatives Location of Gain (Loss) 2012 2011 2010
($ in millions)
Gain (Loss) Recognized in AOCI
(Effective Portion):
Commodity contracts................ AOCI $ — $ 392 $ 386
Foreign currency contracts....... AOCI 10 (24) (22)
$ 10 $ 368 $ 364
Gain (Loss) Reclassified from
AOCI (Effective Portion):
Commodity contracts................ Natural gas, oil and NGL sales $ 27 $ 402 $ 789
Foreign currency contracts....... Interest expense — (18) —
Foreign currency contracts....... Loss on purchase of debt — (20) —
$ 27 $ 364 $ 789
Gain (Loss) Recognized in
Income
Commodity contracts:
Ineffective portion................. Natural gas, oil and NGL sales $ — $ (7) $ (23)
Amount initially excluded
from effectiveness
testing ............................ Natural gas, oil and NGL sales — 22 4
$ — $ 15 $ (19)
Undesignated Derivatives
The following table presents the gain (loss) recognized in the consolidated statements of operations for
instruments not designated as either cash flow or fair value hedges:
Years Ended December 31,
Derivative Contracts Location of Gain (Loss) 2012 2011 2010
($ in millions)
Commodity contracts....................... Natural gas, oil and NGL sales... $ 892 $ 348 $ 629
Interest rate contracts...................... Interest expense......................... (1) (12) 60
Total ................................................................................................. $ 891 $ 336 $ 689
Credit Risk
Derivative instruments that enable us to manage our exposure to natural gas and oil prices and interest rate
volatility expose us to credit risk from our counterparties. To mitigate this risk, we enter into derivative contracts only
with counterparties that are rated investment-grade and deemed by management to be competent and competitive
market makers, and we attempt to limit our exposure to non-performance by any single counterparty. On December 31,
2012, our natural gas, oil and interest rate derivative instruments were spread among 12 counterparties. Additionally,
counterparties to our multi-counterparty secured hedging facility described previously are required to secure their
obligations in excess of defined thresholds. We use this facility for the majority of our natural gas, oil and NGL derivatives.